Owners of Greater Southeast Community Hospital said yesterday they will challenge creditor claims the company has defaulted on an $8 million agreement by failing to disclose pending lawsuits.
Ted A. Berkowitz, attorney for executives at Envision Hospital Corp., said he will file papers in U.S. Bankruptcy Court in the District disputing a recent lawsuit filed by a liquidating trust representing creditors in the company’s 2002 bankruptcy case.
The lawsuit states Envision officials were using “newly borrowed funds to finance ever-increasing operating losses and management expenses.”
According to the complaint, the Arizona-based hospital company also defaulted on the financial agreement because it failed to disclose roughly $50 million in pending legal claims and that it is selling Hadley Memorial Hospital.
But Mr. Berkowitz said the company is not in default.
“None of the alleged defaults relied upon in the trust’s lawsuit involve a failure by the reorganized debtors to make payments required under the … agreement,” Mr. Berkowitz told The Washington Times.
“They are all alleged covenant defaults, which the reorganized debtors deny and which will be addressed … in the forthcoming response to the trust complaint,” he wrote.
Mr. Berkowitz also said Envision officials have told the trust no default has occurred as a result of the sale of Hadley or the “alleged failure” to disclose litigation involving Greater Southeast.
Envision has been attempting to sell Greater Southeast for more than a year. The company recently pledged to pay a half-million dollars a week to upgrade equipment, improve staffing and pay vendors after city health officials uncovered a host of problems at the hospital.
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